Opportunity Zones Program

Overview

The Opportunity Zones program was established by Congress in the Tax Cut and Jobs Act of 2017 to spur long-term private sector investments in low-income rural and urban communities nationwide. The program is based on the bipartisan Investing in Opportunity Act.

Each Governor is authorized to designate 25% of the eligible low-income census tracts as Opportunity Zones in their state. Here is the breakout for our city and state:

In Minnesota, Governor Dayton can designate 128 census tracts as Opportunity Zones out of an eligible 509 low-income census tracts.

The Governor also has the option of including up to 5% of census tracts that are contiguous with an eligible census tract but are not themselves low-income tracts. In Minnesota, the Governor could designate up to 7 tracts as contiguous out of the state's 128 designated Opportunity Zones.

This is the first new national community investment program in over 15 years and has the potential to be the largest economic development program in the U.S.

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Please provide us with input on the Opportunity Zone program, potential impacts, or any questions or suggestions.

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Timeline for Opportunity Zones

There are three core stages to this program. We are in the first stage.

Stage One | Zone Designation (Current Stage)

March 8, 2018: Nominations for eligible census tracts are due to Governor Dayton via DEED. The City of Minneapolis will submit nominations March 8, 2018.

Governor Dayton’s designations are due March 21, 2018 with an extension potentially available for 30 days (April 20, 2018). The state is in the process of requesting an extension.

If an extension is granted, public meetings during March will be announced.

If an extension is granted, Mayor Frey will work with City Council in preparation for a vote on the final nomination.

If an extension is granted, the nomination will be submitted according to the adjusted deadline

Stage Two | Fund Creation

The first official meetings of potential fund holders are anticipated to take place in April 2018. The goal is to ensure that funds created in our market are aligned with the values of the city, are accessible to homegrown businesses, especially those owned by people of color and that investments facility community stabilization.

Anticipated partners include the City of Saint Paul, Twin Cities Local Initiatives Support Corporation (LISC), and other key partners including, but not limited to Hennepin and Ramsey Counties, community development financial institutions (CDFI), banks, community leaders, business owners, and developers.

Stage Three | Investor Attraction

The projects, partnerships and funds are essential to ensuring that the funds have a positive impact on our city. We have identified tracts where significant projects are underway and where the City of Minneapolis or other public entities have influence and can provide guidance on developments.

Opportunity Zone Funds

The Opportunity Zone Funds use the capital invested to make equity investments in businesses and real estate in Opportunity Zones designated by each state.

Funds may be established by CDFI, financial institutions, even new entities.

What stands to be gained by community and business owners?

One opportunity is to close the gap on funding for equitable economic development in our low-wealth communities. We believe that the economically just way to do this is by working with local businesses, particularly those already located within designated areas and reflective of the community to invest in their company’s ability to grow.

Start-ups, manufactures and technology companies are key to the growth of our city and region and we believe this tool has the potential to provide long-term capital investment to support economic vitality and inclusion.

What has the City of Minneapolis considered in this process?

The conversations have focused on potential impacts to renters and homeowners and our business community, technical aspect of the program, cautions, and strategy. Of particular consideration are the following realities:

The country was provided a very short timeline to make designations without rules and regulations from the U.S. Treasury. While we want more investment in our city we want to be intentional about any program’s impact on residents and businesses who call our city home.

Designation of tracts in areas where there is publicly owned land as an additional measure of protection for current residents and businesses.

Designation of tracts that have projects underway or proposed during the period in which the fund will be available.

What does an investor gain by choosing this fund?

The Opportunity Zones program offers investors three incentives for putting some of their $6 trillion in unrealized capital gains to work rebuilding economically distressed communities:

A temporary deferral: An investor can defer capital gains taxes until 2026 by reinvesting capital gains into an Opportunity Fund.

A reduction: The original amount of capital gains on which an investor has to pay deferred taxes is reduced by 10% if the Opportunity Fund investment is held for 5 years and another 5% if held for 7 years.

An exemption: Any capital gains on investments made through the Opportunity Fund accrue tax-free as long as the investor holds them for at least 10 years.

Last updated Mar 8, 2018

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